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GuruFocus has detected 4 Warning Signs with Abbott Laboratories $ABT.
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Abbott Laboratories (NYSE:ABT)
Operating Margin %
17.78% (As of Dec. 2016)

Operating margin is calculated as operating income divided by its revenue. Abbott Laboratories's operating income for the three months ended in Dec. 2016 was $948 Mil. Abbott Laboratories's revenue for the three months ended in Dec. 2016 was $5,333 Mil. Therefore, Abbott Laboratories's operating margin for the quarter that ended in Dec. 2016 was 17.78%.

Good Sign:

Abbott Laboratories operating margin is expanding. Margin expansion is usually a good sign.

ABT' s Operating Margin % Range Over the Past 10 Years
Min: 7.14   Max: 20.27
Current: 15.27

7.14
20.27
ABT's Operating Margin % is ranked higher than
83% of the 270 Companies
in the Global Medical Devices industry.

( Industry Median: 2.62 vs. ABT: 15.27 )

Abbott Laboratories's 5-Year Average operating margin Growth Rate was 17.60% per year.

Abbott Laboratories's operating income for the three months ended in Dec. 2016 was $948 Mil. Its operating income for the trailing twelve months (TTM) ended in Dec. 2016 was $3,185 Mil.


Definition

Operating margin - also known as operating income margin, operating profit margin and return on sales (ROS) - is the ratio of Operating Income divided by net sales or Revenue, usually presented in percent.

Abbott Laboratories's Operating Margin for the fiscal year that ended in Dec. 2016 is calculated as

Operating Margin=Operating Income (A: Dec. 2016 ) / Revenue (A: Dec. 2016 )
=3185 / 20853
=15.27 %

Abbott Laboratories's Operating Margin for the quarter that ended in Dec. 2016 is calculated as

Operating Margin=Operating Income (Q: Dec. 2016 ) / Revenue (Q: Dec. 2016 )
=948 / 5333
=17.78 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.


Explanation

Just like Gross Margin, it is important to see a company maintains its operating margin over time. Among the same industry, a company with higher operating margin is more efficient in its operation. It is also more stable during industry slowdown or recessions. Peter Lynch prefers those with higher margins than those with lower margins.


Be Aware

Compared with a company’s EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company’s revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)’s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia’s Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus’s Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.


Related Terms

Gross Margin, Operating Income, Revenue, Cost of Goods Sold, Selling, General, & Admin. Expense (SGA), Research & Development, Depreciation, Depletion and Amortization


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Abbott Laboratories Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Operating Margin 17.6719.2820.2717.317.617.1410.8512.8414.0515.27

Abbott Laboratories Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Operating Margin 14.3315.4812.4614.1013.8415.7110.7315.3016.9217.78
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